A fine line

The rhetoric used by the UK Government in relation to its controversial welfare changes is about moving people from the benefits system into work. The Department for Work and Pensions wants to encourage people on benefits to start paid work or increase their hours. The term ‘skivers and strivers’ has dominated the debate, but is work the solution it once was?

With a rise in part-time working, soaring household bills and stagnant wages, in-work poverty is a real problem across the UK. Speaking to Holyrood about the so-called bedroom tax, Graeme Brown, director of Shelter Scotland, said: “We know that household budgets are being stretched, we’ve seen further increases in utility prices for some people and no doubt more to come. We know that inflation is beginning to creep up and we know that for people in employment, wages are certainly not keeping up with that.

“Let’s just remember on this issue that for quite a number of people who are in receipt of housing benefit, they are in employment. There is this stereotype that somehow it’s a group of people who have lived their entire lives on benefits. This needs to be challenged. There are a considerable number of people, who are in part-time employment, for example, with shorter working hours, who are in receipt of some form of housing benefits.”

According to a recently released report by the Joseph Rowntree Foundation (JRF), written by the New Policy Institute, almost 13 million people are living in poverty in the UK. For the first time, there are more people in working families living below the poverty line – 6.7 million – than in workless and retired families in poverty combined.

The report found people are remaining in poverty despite moving in and out of work, with some facing very severe hardship. The largest group in poverty are working-age adults without dependent children – 4.7 million people are in this situation, the highest on record, while pensioner poverty is at its lowest level for 30 years.

Julia Unwin, chief executive of JRF, said: “This research shows millions of people are moving in and out of work but rarely out of poverty. Hard work is not working. We have a labour market that lacks pay and protection, with jobs offering precious little security and paltry wages that are insufficient to make ends meet. While a recovery may be gathering momentum in the statistics and official forecasts, for those at the bottom, improving pay and prospects remain a mirage. Recent economic improvements do not outweigh the damage inflicted during the downturn to the incomes of the poorest people across the country. Our report demonstrates there has been progress in some areas and the tide has turned on employment, but this has not been matched by improvements in wages. We must strengthen our efforts to reduce poverty – it is damaging to the people who experience it and harmful to our economic prospects.”

At the same time, another piece of work has revealed Scotland’s top one per cent of income earners – about 25,000 people – have increased their wages and total income at a greater rate than the rest of the nation’s workers in the past decade. According to a report funded by the Economic and Social Research Council (ESRC), someone in the top one per cent income bracket in Scotland can expect to earn 20 times more than someone in the bottom one per cent.

However, once taxes and benefits are taken into account, overall household income inequality in Scotland has not increased substantially since the mid-1990s. This is because the UK tax and benefit system – which also applies to Scotland – transfers more income from higher to lower income households than the average developed country, according to the report. To put these transfers in context, the richest one per cent of earners contribute a fifth of income tax raised in Scotland.
An ESRC-funded team of academics at the University of Stirling produced the report, to inform the referendum debate and policymaking whatever the outcome. Professor David Bell and David Eiser aimed to create a much more comprehensive picture of trends in inequality in Scotland. The team found despite income redistribution, inequality is high in Scotland and the UK as a whole, relative to other developed countries, and especially to the Nordic countries. But since the late 1990s, net income inequality (after taxes and benefits have been taken into account) has tended to increase somewhat faster in the Nordic countries than it has in Scotland. Much of the increase in wage inequality in Scotland has been driven by increased part-time working. This is particularly the case in lower-paying occupations and although this has increased inequality, the authors noted some workers may prefer shorter hours.

The report also shows another important factor has been the changing job market. The share of higher- and lower-paying jobs increased between 2001 and 2010, while the share of middle-wage jobs fell, which is as a result of technological change and globalisation.
Bell said: “Inequality in Scotland, like in many developed nations, is partly being driven by technology, by trade, and even by how we decide to form households. So, there are likely to be limits to the extent that a small open economy can reduce inequality. Scottish independence would provide opportunities, but the constraints that already exist would not go away.”

While the current minimum wage for workers aged 21 years or more is £6.31 per hour, the living wage is calculated according to the basic cost of living in the UK. It currently sits at £7.65 per hour, with the figure in London slightly higher at £8.80 per hour.

Last month, KPMG found the number of workers in Scotland being paid the living wage is more than the rest of the UK but the number of people below the level is increasing. Around 435,000 people are being paid less than the living wage in Scotland, an increase of more than 70,000 from an estimated 360,000 in 2012, KPMG said. The proportion of Scottish workers paid below the figure is 20 per cent, slightly below the rest of the UK where 21 per cent of employees are paid less than the living wage. The areas with the highest proportion of workers paid below the living wage are Dumfries and Galloway, at 36 per cent, Clackmannanshire, at 29 per cent and East Renfrewshire, at 20 per cent. The Scottish Government’s pay policy sees every member of staff employed by the Government, or one of their agencies, earn at least the living wage. However, contractors working with the Scottish Government need only pay their staff the minimum wage, determined by Westminster.

In a recent blog post, Dave Watson, UNISON Scotland’s head of bargaining and campaigns, said: “Almost all the public sector in Scotland is now committed to paying the Scottish living wage with less than three per cent of the workforce not covered. The challenge is to extend the scope to more parts of the voluntary and private sector. The Scottish Government has agreed to financially support a project to extend accreditation and this is very welcome. A field worker should be able to explain the benefits to a wider range of employers and help them achieve accreditation.

“However, the key next step is to promote the Scottish living wage out with the public sector through procurement. The Procurement Reform Bill recently introduced into the Scottish Parliament should include a requirement that all contracting authorities stipulate payment of the Scottish living wage as a condition for performance of the contract. In addition, there should be a code of practice for the promotion of the living wage in procurement, giving guidance on the legal position, good practice, uprating, accreditation, s52 statutory guidance and the PPP protocol on the two-tier workforce.”

First Minister Alex Salmond has stated an SNP Government in an independent Scotland would guarantee the minimum wage would keep up with the rising cost of living.

He said: “Work should pay but we must ensure work pays without reducing people to penury or despair. If elected, on independence – this Scottish Government will establish a Fair Work Commission. The central pillar of our Fair Work Commission will be to set a minimum wage guarantee. This guarantee will ensure a minimum wage that rises – at the very least – in line with inflation.”

Holyrood recently debated the issue of women and work, with Minister for Youth Employment Angela Constance saying while women are “doing well” in the labour market, more must be done. She said: “The latest statistics show that the female employment rate is 69.5 per cent in Scotland, which is an increase of 3.2 per cent in the past year. Over the year, the number of women in employment in Scotland has risen by 54,000, and female underemployment has also decreased by 2.9 per cent over the past year.

“However, we know that problems still exist, and we need to find ways within our powers to tackle them. The cost and availability of childcare is often cited as the key problem for working parents and women in particular. That is why we are legislating now, via the Children and Young People (Scotland) Bill, to increase the level of funded early learning and childcare from 475 hours to 600 hours per year for three and four-year-olds and, from 2014, for the most vulnerable two-year-olds.”

However, Kezia Dugdale, Labour’s education spokesperson, added: “We are coming out of a recession and going back into economic growth. It is more important than ever that women play an equal part in that economic growth. That is why I ask the Government to be more ambitious in what it says about the jobs of the future and women’s ability to access them.”